Domestic Affairs

The political scene in Canada was uncertain in 1999. No important issues seized the attention of voters, and the Liberal government of Jean Chrétien, in office since 1993, appeared lacking in fresh ideas. Although the Liberals still commanded broad support across Canada, two-thirds of Canadians believed that it was time for Chrétien, 65, to retire. He declared that he intended to guide Canada into the new millennium and lead his government into a third general election, possibly in 2001.

Chrétien’s prime ministership had been helped by the fragmented nature of his political opposition. In the election of 1997, Canadian voters had chosen their representatives along regional lines: the Reform Party was strong in the western provinces; the separatist Bloc Québécois (BQ) was entrenched in Quebec; and Atlantic Canada was divided between the democratic-socialist New Democratic Party (NDP), Progressive Conservative Party (PCP), and Liberal Party members. This distribution left the Liberals strong only in Ontario, from which province two-thirds of their supporters in the House of Commons were drawn. Standings in the 301-seat Commons in October, at the beginning of the new session of Parliament, were as follows: Liberal Party 157; Reform Party 58; BQ 44; PCP 19; NDP 20; independent 3. Two MPs changed allegiances during the year—one from the PCP to the Liberals, the other from the NDP to the PCP.

The two conservative opposition parties spent the year in re-arranging themselves for the next electoral contest. Preston Manning, leader of the 12-year-old Reform Party, the official opposition in the Commons, unveiled a plan to create a new political movement known as the United Alternative, a common front of “small c” conservatives that would confront the Liberals. He sought to unite the Reform Party and the PCP. The PCP, however, under former prime minister Joe Clark, back in active politics after 10 years on the sidelines, would have nothing to do with the plan. Public opinion polls seemed to favour Clark’s position.

Prime Minister Chrétien shuffled his Cabinet on August 3, bringing together a team that he said he would lead into the next election. He emphasized the environment and social policy by making strong new appointments in these fields. Five ministers were replaced in the 28-member Cabinet, but Chrétien kept intact his core group of associates: Paul Martin in finance, Allan Rock in health, Lloyd Axworthy in foreign affairs, Anne McLellan in justice, and John Manley in industry.

Six of Canada’s 10 provinces held general elections in 1999. It was difficult to discern a pattern in the results. In three provinces sitting governments were defeated, whereas in the other three they were returned, although in two cases with reduced majorities. The results demonstrated again that Canadians, uneasy with too much authority given to one party, compensated by supporting one party at the national level and others in the provinces. Thus, the Liberals, dominant in national politics, lost ground in the provinces.

Canada gained a governor-general of a different stamp when Adrienne Clarkson, a former broadcaster and author, was sworn in on October 7 as the 26th representative of Queen Elizabeth II in Canada. (seeBiographies.) Of Chinese extraction, Clarkson had moved to Canada with her parents from Hong Kong at the age of three and had made a name for herself as a staunch defender of Canadian nationalism in its economic and cultural aspects. Her appointment was seen as revitalizing the vice-regal office, which for the last 20 years had been filled by a number of patronage appointments drawn from the ranks of former politicians.

On April 1 the new Canadian territory of Nunavut, comprising the eastern, mostly ethnic Inuit portion of the Northwest Territories, came into being. (SeeSpecial Report.)

The deadlock in popular standing in Quebec between those who favoured independence and those who believed Quebec should remain part of Canada continued in 1999. Support for Quebec sovereignty, a vague concept that many saw as including a continuing association with Canada, hovered around 40% in polls taken among decided voters. The federalist camp numbered 51–54%. There was little change in attitudes from before the last Quebec election in November 1998, when the province confirmed in power a nationalist Parti Québécois (PQ) government. On December 10 Prime Minister Chrétien introduced draft legislation setting out in law the conditions for the next Quebec referendum on secession. The legislation was based on the 1998 Supreme Court decision that declared unilateral secession by Quebec to be illegal. Quebec countered with its own legislation on the issue.

A conference of federal ministers, provincial premiers, and territorial leaders, which ended in Ottawa on February 4, broke new ground in working out rules governing federal support for provincial social programs. For the first time in recent years, an agreement was concluded over the objections of Quebec. The Framework to Improve the Social Union for Canadians was rejected by Premier Lucien Bouchard, the separatist leader from Quebec. In return for provincial concurrence with the new arrangements, the federal government agreed to provide substantial new funding for health care. This money would go to Quebec as well as to the other provinces.

The Economy

Economic performance was strong in 1999, registering continuous growth for 12 months by July, the longest spell in more than 10 years. An annual rate of increase in gross domestic product (GDP) of 3–3.% was forecast. A number of factors contributed to the momentum: an improvement in commodity markets and prices as Asian economies revived; the accelerating United States economy, to which over 80% of Canadian exports were directed; and the return of a positive measure of business and consumer confidence. Under these conditions the Canadian dollar regained some standing after its dramatic decline in 1998. By October it was trading at U.S. 68.1 cents. Surging economic growth had a beneficial effect on the rate of unemployment, which in October reached 7.2% of the labour force. Inflation was not a threat, although the consumer price index, at 2.1% over 12 months in August, was higher than in the previous year.

Proposed mergers between two pairs of Canada’s largest banks, announced in January and April 1998, were turned down by Finance Minister Martin on December 14, 1998. Faced with this decision, the four banks abandoned their merger proposals. Nevertheless, Martin allowed the last important independent trust company, Canada Trust, to be bought on August 3, 1999, by the Toronto-Dominion Bank. The new entity would have 10 million account holders, which would make it the largest financial services organization in Canada. The strong possibility of a merger between Canada’s two major airlines emerged on August 24 when the Onex Corp., a buyout specialist based in Toronto, bid for both carriers. The Onex bid was withdrawn on November 5 when a Quebec Superior Court ruled it to be illegal. Canadian Airlines then accepted a merger with Air Canada that, after regulatory approval, would result in the creation of the world’s 10th largest airline. The merger would end the destructive competition that had driven Canadian Airlines, the smaller of the two, to the verge of bankruptcy. The federal government had hoped that the two carriers would come together voluntarily. The most familiar name in retail marketing almost disappeared from the Canadian scene. T. Eaton Co. Ltd., founded 130 years earlier in Toronto by an Irish immigrant, filed for bankruptcy on August 20. On October 4 Sears Canada announced that it was buying five key Eaton’s stores that it would operate under the Eaton’s name.

Presenting what he described as a “health care budget” on February 16, Martin provided Can$2.5 billion (Can$1 = about US$0.68) over the next three years to the provinces for health, education, and social services. Grants to the provinces would rise to Can$15 billion by fiscal year 2001–02, the same level they had been when the Chrétien government began cutting back health transfers in 1995. The Liberal Party prided itself on being a promoter of medicare, so renewed spending in the area represented a return to the party’s principles.

The budget was balanced for a second year in a row, the first time this had happened since 1951–52. Later it was revealed that the surplus for fiscal 1998–99 was Can$2.9 billion, not as large as the Can$3.5 billion recorded for the previous year. Modest tax cuts were announced for the fiscal year begun in April 1999; a 3% surtax on incomes over Can$65,000 was eliminated to complement the abolition of a similar tax on incomes below that level the year before.

Later discussion on the budget focused on what to do with surpluses. So far the Chrétien government had followed the campaign promise it had made in 1997—half the surplus for spending, the other half for tax cuts and debt reduction. Whereas the finance minister seemed to lean toward tax cuts, the prime minister spoke of the many needs that could be met only by increased spending. Polls showed that on the whole Canadians did not want to make tax cuts the highest priority in future federal budgets.

International Affairs

Canada continued to be heavily involved in peacekeeping and humanitarian efforts during 1999. About 4,000 Canadian men and women out of a total armed forces of 60,000 served in places as diverse as the Middle East, Haiti, and central Africa. The largest groups of military personnel were in Bosnia and Herzegovina and Kosovo, with about 1,400 Canadians stationed in each area to uphold shaky peace settlements. During NATO’s Kosovo campaign of March and April, 18 Canadian CF-18 aircraft were stationed at Aviano, Italy, from which they flew 618 bombing sorties over Yugoslav territory. Canada also took in more than 5,000 refugees from Kosovo and placed them in local communities across the country. Almost 1,000 wished to be repatriated when the hostilities were over. In October Canada sent 275 troops, two Hercules aircraft supported by 103 personnel, and a supply ship to East Timor, Indon., to help in maintaining order.

Peacekeeping duties imposed a strain on Canada’s defense forces, which had been starved for funding for years. At a meeting of NATO defense ministers in Toronto on September 21, Canada was accused of falling short on a number of its obligations to the alliance. The U.S. and the U.K. called for heavier defense spending, pointing out that whereas the U.S. spent about 3.4% of its GDP on defense, Canada spent only about 1.2%. Canada endeavoured to meet this criticism by acquiring new weapons systems to compensate for reduced manpower and by purchasing equipment such as armoured vehicles and naval frigates.

Canada took a prominent role in the debate within NATO over nuclear warheads. A nonnuclear power, Canada urged its nuclear allies to give up their weapons, claiming that this act would help the cause of worldwide disarmament. Canada put forward these views at the 50th anniversary celebrations of NATO in Washington, D.C., April 23–25. It was also opposed to the “first-use possibility” of nuclear weapons in NATO’s strategic thinking. Commentators observed that Canada’s emphasis on “soft power,” the ability to influence other states by nonviolent means, depended on “hard power” for its credibility, through an effective role in NATO.

The global phenomenon of human smuggling touched Canada in the summer of 1999. From July to September four rusty and decrepit fishing trawlers, unnamed and carrying no flags, turned up off the Pacific coast of Vancouver Island and the Queen Charlotte Islands. They carried a total of 600 illegal immigrants who had undertaken an arduous 40-day voyage from the southern Chinese province of Fujian. In one case the immigrants were landed on a lonely stretch of rocky coast; in the others the ships were apprehended at sea and escorted to port. The immigrants, among them a large number of unaccompanied young boys, had a right under Canadian law to apply for refugee status through an individual hearing. Many Chinese claiming to be refugees who had gone to Canada in the past had not turned up for their hearings and had gone underground. It was believed that the human smuggling was directed by organized crime and that the ultimate destination of the immigrants was the U.S., where they would work in low-paying jobs to cover the cost of their voyages.

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